Turkish Legislation on Electronic Communication and Competition

1. Definition of Electronic Communication

In accordance with the Act on Electronic Communication, electronic communication is defined as “transmission, exchange and receiving of all kinds of signals, symbols, sounds, images and data which could be converted into electrical signals, by means of cable, radio, optic, electric, magnetic, electromagnetic, electrochemical, electromechanical and other types of transmission systems”. Provision of such communication, partial or as a whole, is considered as “electronic communications service”.

Entities which obtained the authorisation are granted certain rights and obligations specific to the electronic communication services. It is aimed to:

 create a competitive environment by increasing the number of operators

 establish a reliable environment in the sector  foster the domestic and foreign investment

 provide healthy development of the sector

 use national sources effectively and efficiently

 diffuse the services

 provide services with a determined quality of service

 protect the rights of consumers.

As it can be understood, electronic communications sector has multiple operators and encourages a competitive environment. In this regard, Information and Communication Technologies Authority is in cooperation with Competition Authority in an effort to establish, improve and protect the competitive environment in the electronic communications sector.

2. Definition of Dominant Position

a) General Information

In the scope of the Act on Protection of Competition(N°4054), the dominant position is defined as “(t)he power of one or more undertakings in a particular market to determine economic parameters such as price, supply, the amount of production and distribution, by acting independently of their competitors and customers”. Within the context of this definition, monopolies are also considered as dominant position, they are the highest order of dominant position

Being in a “dominant position” itself is not considered as a breach of the Act, it is allowed, for the undertakings, to stand out among its competitors as a result of their internal activities. However, the Act prohibits the use of market power in a way decreasing customer‟s wealth. Resulting from this prohibition, it can be stated that undertakings in a dominant position are responsible to not to restrict the competition in the market.

For several markets, market share of the undertaking is an indication for being in a dominant position. In the decisions of the Turkish Competition Authority, undertakings having less than 40% of the market shares are not likely to be in dominant position. Undertakings exceeding this limit are subject to more detailed examination by the CA. Likewise, for undertakings occupying more than 50% of the market is considered as a “presumption of dominant position”3 . In addition, stability of the market shares, number of competitors in the market and their market shares are also considered as a criterion to analyse whether the undertaking is in dominant position. More the shares are stable and numerous, more the undertaking is likely to be considered to be in dominant position.

Being insufficient, these criteria are supported with another one being “capability to create a barrier in entering the market”. Under this criterion it is examined whether the undertaking is capable of introducing a barrier for undertakings willing to enter the market.

b) Sector Specific Information In order to provide thorough information on dominant position in the electronic communications sector, “market” in which undertakings operate should be specified. Please kindly look at the following part for further information.

3. Definition of Market

a) General Information

Definition of the “market” has significance that cannot be neglected in calculating the market shares while determining whether there is an abuse of dominant position. The term “market” has a special use in competition law, separating it from the daily use. There are two kinds of markets: relevant product market and relevant geographical market. In an effort to frame the concept of market, these two kinds of markets should coincide.

Relevant market is not defined in the scope of the Act on Protection of Competition. However, several communiqués include the definition of relevant product and geographical market. In order to detect the “market” the most important criterion is “substitutability”. Nevertheless, there exist several other criteria in order to support the substitutability such as “specific financial tests for indicating the market, customers‟ and competitors‟ opinions, various customer profiles etc.

The “market” concept should be carefully framed especially throughout the examination of undertakings‟ conducts both in primary and secondary markets. In related markets, substitutability in the primary market shall affect the secondary market by limiting the options in the secondary market; the choice made for the primary market may have definite effect on the secondary market.

b) Sector Specific Information

Despite the lack of general definition of “market”, Directive on Market Analysis provides a “relevant market” definition for the electronic communications sector which is “the market consists of a particular electronic communications service and other substitutable electronic communications services that are provided throughout or in a part of the Country”.

Regarding the electronic communication sector, electronic communication network could be classified as fixed or mobile. Nowadays, electronic communication operators manage 2 nd, 3rd and 4th generation of mobile network. After the introduction of 3rd generation networks, operators have begun to offer several services by using mobile networks as base.

In Turkey, first undertaking was Turkcell in mobile telephone services which have joined by Vodafone and Avea (Turk Telekom at the moment) over time. As they all function in all dimensions of mobile network services, the relevant market should be defined for each specific case. However, regarding the Guideline issued by Turkish Competition Authority, it is indicated that “if the investigated action does not create any problems for fair competition in means of both relevant product and relevant geographical market, or if all possible definitions of market distorts competition, market may not be defined”.6

4. Definition of the Abuse of Dominant Position

a) General Information

Abuse of dominant position is regulated in the Article 6 of the Act “(1) The abuse, by one or more undertakings, of their dominant position in a market for goods or services within the whole or a part of the country on their own or through agreements with others or through concerted practices, is illegal and prohibited”. In the following paragraph indicates, without limiting the definition, several cases of abuse of dominant position such as:

 Preventing, directly or indirectly, another undertaking from entering into the area of commercial activity, or actions aimed at complicating the activities of competitors in the market,

 Making direct or indirect discrimination by offering different terms to purchasers with equal status for the same and equal rights, obligations and acts,

 Purchasing another good or service together with a good or service, or tying a good or service demanded by purchasers acting as intermediary undertakings to the condition of displaying another good or service by the purchaser, or imposing limitations with regard to the terms of purchase and sale in case of resale, such as not selling a purchased good below a particular price,

 Actions which aim at distorting competitive conditions in another market for goods or services by means of exploiting financial, technological and commercial advantages created by dominance in a particular market,

 Restricting production, marketing or technical development to the prejudice of consumers.

Despite the classification of dominant position into three groups as “exclusionary, abusive, discriminatory”, in practise, it is not possible for every case to separate these three characters of the abuse.

As it can be seen from above, it is not sufficient to be in a dominant position; it is also required that the dominant position to be used abusively without any just cause. Exclusionary abuse of dominant position affects the competition negatively both in the regular and the downstream market related to the regular market. And in the end, customers‟ welfare diminishes as a result of anticompetitive conducts of dominant operators. Along with the general criteria mentioned above on abuse of dominant position, Competitive Authority emphasizes several cases of abuse such as: refusal to supply, predatory pricing, price/margin squeeze, exclusivity/single branding agreements, Rebate systems, tying.

Currently, in electronic communications sector in Turkey, “refusal to supply” is the most common problem in means of competition. Thus, “refusal to supply” will be examined in the following section.

b) Refusal to supply

Refusal to supply could be considered as an abusive conduct where these criteria are met:

 the refusal should relate to a product or service that is indispensable to be able to compete in a downstream market,

 the refusal should be likely to lead to the elimination of effective competition in the downstream market,

 the refusal should be likely to lead to consumer harm Refusal to supply could be considered as “a refusal of an undertaking to supply the goods or services it produces as well as tangible or intangible business inputs in its possession to other undertakings, or its direct or indirect refusal to allow other undertakings to use thereof are considered instances of refusal to supply”.

If an undertaking has a specific indispensable product/service in its possession, it can be considered as exclusivity and if this specific product/service is standardised in the market, exclusivity turns into monopoly. In the case of utilisation of the specific product/service in order to create another product/service, two connected markets occur. If it is not possible to create a substitute, de facto or de jure, for the primary indispensable product/service (essential facility), refusal to supply in the specific case would not be rightful.

Thus, it could be stated that refusal to supply can also take the form of establishing barriers for other competitive undertakings while entering the downstream market. If the refusal is related to an indispensable product to compete in the downstream market, if the refusal is likely to eliminate the effective competition in the downstream market and if the refusal is likely to lead to consumer harm, refusal to supply is considered as “abuse of dominant position”. As a result of refusal to supply, the dominant undertaking creates a barrier for other undertakings to enter the downstream market, in other words, the dominant undertaking abuses its dominant position in a market in order to eliminate other competitors who are deprived from the indispensable product and if this deprival is without any just cause, it is considered as an abuse of the dominant position eliminating the effective competition. In these cases, the Board examines whether refusal to supply is more harmful than imposing an obligation to supply. If that be the case, an obligation to supply is considered.

c) Sector Specific Information

As it is mentioned above, in the electronic communications sector, one of the major claims that the Competition Authority deals with are the claims of unjust refusal to supply. In order to provide a better understanding, previous conditions of the market should be mentioned.

Türk Telekom Aġ was de jure monopoly in network carrying sound until 2002 which indicated a prohibition of introducing another networks by undertakings. However, since 2002, it is de facto monopoly, as a creation of a new network would not be possible. Therefore, Türk Telekom possessing the network, which is the essential facility for the primary and downstream market, holds the key for entering to the downstream market, in other words, monopoly in the primary market leads to monopoly in the connected downstream market. If Türk Telekom does not grant the use of the essential facility to other undertakings, it would create an abuse of dominant position since Türk Telekom would have used its dominant position in the primary market to create an entrance barrier for the downstream market.

Currently, telecom infrastructure and fibre internet infrastructure are in privileged use of Türk Telekom in condition of using, sharing and developing; they are not in the property of Türk Telekom.

B. Turkish Electronic Communications Market

1. General Data on Market

» According to the general market data, by 15 August 2016, number of undertakings operating in electronic communications market is 622.

» Regarding the internet and broadband internet issues, there is a tendency of increase in the number of subscription with respect to the increase in the use of mobile and fibre internet users. Currently there are 55.3 million users of broadband internet. In total, there is an increase of 24.6% of internet subscribers.

» In mobile communication sector, number of 3G users is in decrease while 4G users increase and compared to the previous year mobile communication traffic volume has increased 6.6%.

» According to the corporate incomes of Turkcell, Avea (Turk Telekom at the moment) and Vodafone, market shares by the end of the second quarter of 2016 are 39.3%, 22% and 38.7% respectively.

» Currently Turk Telekom has 218.802 km of fibre infrastructure where 124.560 km of it is used for access. Alternative operators have 58.956 km of fibre infrastructure.

Considering this fact in the light of explanations provided in the previous part (Turkish Legislation on Electronic Communications and Competition), Türk Telekom possesses the majority of the fibre infrastructure and they should facilitate the access of other internet service providers in order to eliminate any possibility of abuse of dominant position.

It could be stated that there are several problems regarding facilitation of access to the infrastructure. On the other hand, if one undertaking is to establish its own fibre network there are several permissions to be taken and authorisations to be obtained which constitutes a real barrier.

It is important to underline that for 4,5G technology, fibre infrastructure is a must. In order to carry out the capacity of functioning of 4,5G fibre networks should be penetrated, fibre infrastructure needs to be elevated to 5-6 times of the current situation.

All in all, it would not be wrong to say that electronic communications sector is very open to development in means of investment. However, it should not be forgotten that this sector is subject to competition law principles and regulations by several independent administrative authorities. Actions of current providers and also entrance of new competitors to the sector is controlled by regulatory bodies in the scope of competition law.